RENEWABLES OFFER “BEST OUTCOME FOR DOLLARS INVESTED”

PARIS: Five big announcements marked Climate Finance Day, the closing event of Climate Week Paris, including the total divestment from coal of a major insurance company and the declaration of French Minister Sapin that institutional investors will have to disclose their carbon emissions.

The major closing event of Climate Week Paris, Climate Finance Day, which was organized by Paris EUROPLACE, brought together institutional investors and financial and government leaders to discuss the question of how to shift the trillions necessary to finance the global low carbon economy.

French Finance Minister Michel Sapin opened the event by announcing France will soon pass a law requiring institutional investors to disclose their carbon footprint. It will be a “game-changer” action, in line with government’s need to “have a better understanding of climate emissions before allowing credit for any project.”

The measure is also intended to help institutional investors to “understand how their assets are exposed to climate change”, in order to convince them to “decarbonize their portfolios”. Crucially, this law would facilitate divestment from fossil fuels to low carbon investments.

Minister Sapin also underscored that finance ministers of different countries are working to make sure that the climate-related efforts of the G20 will include institutional investors, a move that was defined by UNFCCC Executive Secretary Christiana Figueres as “a turning point” and “the first sign of the transformation”. She said it is an extremely positive sign to have the G20 asking the stability board to look into climate risk: “To me that means that we have reached the scale of the financial system.”

ORDERLY DIVESTMENT

The discussions were dominated by the issue of divestment, and how to avoid a ‘disorderly’ global shift, or a sharp financial slow-down which would disrupt the economy.

Anthony Hobley, CEO, Carbon Tracker, explained the link between the carbon bubble – which is the concept of a limited valuation of companies which are related to fossil-fuel production – and a disorderly shift: “One of the ways to think about the carbon bubble is to imagine a carbon overhand, that is getting bigger every day we delay action. It is that carbon bubble that will build up the risk.

“We are at the last minute to choose if we want to have an orderly transition, in which we scale back from fossil fuels, while we simultaneously encourage clean energy, or we do it overnight, in a disorderly manner. That risk is going up every day.”

Suggesting who should be first to start the divestment from fossil fuels, Anthony Hobley continued: “If I was an investor in the fossil fuel industry, I’d be really concerned now. Because a lot of them will not survive without national subsidies. And if governments are desperate to replenish their treasures, here is a great opportunity: use that money for education and health.”

But the major announcements of the day came from Henri de Castries, CEO of Axa, a major insurance company. Axa has officially committed to divest from all of its remaining 500 million euros of coal investments between now and the end of the year, becoming one of the first companies to take such a game-changing decision.

The investments will be shifted to the low carbon sector, and he also committed to tripling the amount of Axa’s green investments by 2020, reaching 3 billion euros. Together with Caisse des Depots, Axa also committed to disclose the carbon footprint of their portfolios, which will incentivize transparency in the financial and insurance community.

Axa also announced joining the African Risk Capacity, a decision that will help increase disaster risk resilience by bringing cash flows to areas where prevention and recovering from natural disasters are too often blocked by the lack of immediate funds.

TECTONIC SHIFT

Concluding the day in a which summed up the whole week of unexpected announcements on climate and business action, Janos Pasztor, Assistant Secretary-General on Climate Change United Nations, said there has been a “tectonic shift in the way business and private finance community are addressing climate change”.

The day was closed by an intervention of French Foreign Minister Laurent Fabius. After concluding “there is no alternative solution because there is no alternative planet”, and reiterating that there is now the “will to succeed” at global climate talks in Paris this December, the Minister echoed the general consensus of the thousands of senior business, finance and government leaders who had taken part in events during Climate Week Paris: “Even one year ago, such meetings would have been unthinkable… which means that something is on the move”, adding “we should continue and magnify what has been done in this turning week and the role we can all play”.